But the world's No. 2 automaker reaffirmed its commitment to the site by promising 500 new jobs and more than $500 million of investment to make Dagenham the global centre of diesel engines, demand for which is booming. Another $100 million is to be spent on retooling the plant.

Ford's European chairman Nick Scheele told a news conference that the cutback in car output was essential in the face of severe over-capacity in Europe which had made the financial performance of the business ``totally unacceptable.''

The company aims to cut fixed costs by around $1 billion a year in Europe to cope with a more competitive environment. Scheele said Ford did not expect to sell more than two million units a year over the short- to medium-term.Ford's annual European capacity totalled 2.25 million in 1999 but it sold only 1.65 million cars. ``The goal is to develop a strategy that will lead to a viable future for our European operations,'' he said.

``It is with great regret that we took this decision but we have a responsibility that stretches beyond Dagenham and across Europe.''Dagenham, which has made cars for the last 70 years, currently employs 7,700. Ford will take a financial charge for the restructuring at Dagenham but did not give a number.

Ford chief executive Jac Nasser said the changes at Dagenham should be seen as a rebirth. ``Dagenham is going to continue forever,'' Nasser told reporters in Atlanta on Thursday before the formal announcement.

Ford announced last month it would cut some 1,350 jobs at Dagenham and said further steps might be taken in an attempt to revive its struggling European operations.

Official figures released on Friday showed Ford was the hardest hit by a fall in West European new car registrations in April, experiencing a 17.7 per cent drop to 129,800.

Ford's market share in western European countries slipped to 10.3 per cent from 11.4 per cent a year earlier, according to the European Automobile Manufacturers Association (ACEA).

In April, Ford said it still planned to build some Fiestas at Dagenham from early 2002. But the company said Cologne was a more flexible manufacturing base.